Good morning investors. Three key job reports come due this week:

• Tuesday: JOLTS

• Wednesday: ADP Private Payrolls

• Friday: Non-farm payrolls

We’ll share takeaways from each data dump as the week goes on.

This morning, let’s turn to the boom in exuberance.

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Risk? Traders either don’t see it or don’t care

Investors are piling into stocks like it’s 1999, 2009, or 2021. 

The S&P 500 just secured its 53rd record high of the year, and seasonality, data and vibes suggest more are on the way before the calendar turns. 

While the benchmark index has returned a blistering 27.19% in 2024 so far, the uninterrupted momentum suggests a nonchalance about looming risks.

Some market watchers anticipate an inflation bump under a second Trump administration, while others remain cautious about a trade war, worsening geopolitical relations in the Middle East, and mixed messaging from the Federal Reserve. 

“There seems to be a growing chorus that stock market returns are unprecedented,” strategists at Richard Bernstein Advisors told clients in a note. “Returns aren’t unprecedented at all, but investors’ enthusiasm and willingness to take risk might be.”

The appetite for risk assets seems to have grown since Donald Trump’s election win one month ago. Look at the performance for the following in November alone:

• Nasdaq 100: +5.35%

• S&P 500: +5.96%

• Russell 2000: +11.07%

• Bitcoin: +39.1%

Indeed, the consensus optimism is reflected in the recent stretch of market tranquility. The VIX — also called Wall Street’s fear gauge — hovers at historically low levels. 

Exuberance may even present a bigger threat than anything out of the political realm. 

“A more immediate risk to the stock market rally than tariffs is that investors are getting too bullish,” wrote veteran strategist Ed Yardeni in a November note. 

Bank of America clients, for one, have been net buyers of US equities and ETFs for three weeks in a row with institutional traders and hedge funds leading the way. 

Meanwhile, the November Consumer Confidence survey showed 56.4% of respondents expect stocks to climb in the year ahead, the Conference Board reported. 

“From a contrarian perspective, this [survey] suggests that a pullback is likely,” Yardeni said. 

Most Wall Street firms expect double-digit gains in 2025. Yardeni Research leads the way with a year-end S&P 500 price target of 7,000, about 17% higher than current levels. 

With euphoria coming from both retail and institutional players, investors’ exposure to leveraged ETFs — a volatile, speculative corner of the market — has climbed to a record high, Nomura data shows. 

At the same time, financial firms have launched a record 46 products in this category this year, according to Bloomberg data. 

All the while, expectations for the Fed and labor market remain cloudy. 

“Remember too that the American data is systematically overstating job creation on account of some questionable assumptions about the number of smaller companies being created or destroyed,” said ING economist James Smith. “Downward revisions are surely coming.”

“A blitz of unwelcome surprises on the US jobs market, regardless of Trump’s policy agenda, is perhaps the most obvious downside risk for early 2025.”

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Elsewhere:

🛒 Black Friday sales looked strong. Consumers are still willing to open their wallets for the holidays, according to the critical day of the holiday shopping bonanza. Retail sales, excluding automotive, grew 3.4% on the day after Thanksgiving. In-store sales, however, remained lower than last year’s pace. (Bloomberg)

📊What happens to crypto under Trump 2.0? Over recent years, regulators tried to policy the industry using the strongest weapons at their disposal, but change is coming. The next SEC regime will likely offer crypto exchanges favorable settlements or pauses to ongoing court battles, so long as no fraud claims are involved. (WSJ)

💵 Trump wants to maintain dollar dominance. In a social post this weekend, the president-elect warned BRICS nations he wants commitments that they would not move to create a new currency as an alternative to the US buck. He reiterated his threat to impose a 100% tariff on those countries. (Bloomberg)

Rapid-fire:

• Shares of Ferrari have outpaced luxury rivals like Mercedes and LVMH by a huge margin in 2024 (Barron’s)

• The Fed is putting much more weight on keeping unemployment low than getting inflation down (Apollo)

• Ark Invest’s Cathie Wood said she would welcome an era of looser regulation in technology and digital assets under the next president (Bloomberg)

• Elon Musk asked a federal court to stop ChatGPT-creator OpenAI from converting to a for-profit company (CNBC)

• President-elect Trump has chosen Kash Patel to be the FBI director (WSJ)

• Tesla rolled out a new version of its self-driving software on Saturday (Barron’s)

• The median annual US home insurance premium rose 33% between 2020 and 2023 (ResiClub)

• The cryptocurrency XRP has surpassed a $100 billion market cap, reaching 2018 levels after a 30% gain in one week (CoinDesk)

Traders see 67% odds of 4 rate cuts in 2025, according to Kalshi, the biggest US prediction market:

Last thing:

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